The American Jobs Project was born of two problems: the loss of middle-income jobs and congressional paralysis in the United States. It seeks to address these problems by taking advantage of one of the biggest market opportunities of our era—the advanced energy industry—and building states’ manufacturing capacity to capitalize on increasing global demand. While some economic indicators show that Oregon has made great strides towards recovery since the recession, other indicators suggest full recovery is still a long way off. In particular, middle-wage jobs, the poverty rate, and caseloads for needs-based programs are only 50 percent recovered to pre-recession levels. Efforts to foster good-paying manufacturing jobs and to strengthen talent development tailored for the needs of industry could bolster the state’s economy.
Extensive research, including more than sixty interviews with stakeholders and experts in Oregon, has identified next-generation manufacturing (NGM) technology as a promising economic engine and job creator. Next-generation manufacturing is a unique opportunity for Oregon because of skyrocketing global demand, fertile cluster assets, complementary industries, and the unique expertise of its workforce.
In NGM, industrial facility equipment and manufacturing machinery are integrated with information and communications technology. Through increased visibility, responsiveness, and precise control of industrial processes, NGM technology can help manufacturers improve building efficiency, reduce waste material, and boost productivity. Two examples of NGM technology are 3D printing (additive manufacturing), which can produce parts with less input material than traditional methods, and the Industrial Internet of Things (IoT), which optimizes production through frequent and instantaneous communication among a manufacturer’s production facilities, transportation system, and software networks. In addition to reduced costs and faster time to market, NGM technology can bring about substantial increases in energy efficiency up and down the supply chain. This makes NGM a major feature of the advanced energy landscape.
Oregon is poised to become a leader in NGM technology; state and local leaders could realize this potential through strategies that both leverage Oregon’s competitive advantages and strategically target areas for growth:
- Capitalize on increasing technology demand. Global demand for networked industrial equipment and precision manufacturing machines is exploding, with some market segments expected to grow by a factor of nine over the next seven years.
- Leverage Oregon’s culture of energy efficiency and innovation. The state’s large, active, and vocal community of energy efficiency NGOs provides expertise, connections, and other support to NGM technology manufacturers and end users.
- Channel the innovative energy of Oregon’s research organizations. Oregon’s institutions of higher education, commercial development labs, and nonprofits conduct cutting-edge research and provide commercialization support to emerging fields that accelerate NGM’s development.
- Mobilize the state’s tech-savvy workers. With high numbers of software engineers, web developers, and industrial technicians, Oregon has the fourth-highest proportion of technical workers in the nation, and a head start on building a workforce to support a growing NGM technology industry.
- Build on complementary business capacity. Oregon’s sensors, controls, and software platform supplier capacity, already supported by fifty-three firms, can grow synergistically with the state’s large and growing manufacturing industries, including semiconductors and aerospace.
- Stand on Oregon’s advanced energy and business policy commitments. Oregon’s policies, which promote energy efficiency and a business-friendly climate, ensure a willing local market for NGM technologies.
- Support quality local jobs statewide. With forward-thinking solutions, next-generation manufacturing could support an average of over 65,000 Oregon jobs annually through 2030.
To realize these opportunities, state and local leaders can pursue strategies that create a strong foundation for industry growth in next-generation manufacturing and help Oregon’s businesses grow, innovate, and outcompete regional, national, and global competitors. In today’s globalized economy, businesses are more likely to thrive in cities and states that offer a rich innovation ecosystem, provide fertile ground for capital investment, boast a highly skilled workforce, and offer clear policy signals. With policies that facilitate deployment of NGM technology in the local Oregon market, the state can ensure its startups have access to the early customers that are critical for long-term success. With a dense local network of NGM technology suppliers, Oregon’s companies can reap the benefits of increased productivity and operational efficiency that NGM offers, amplifying local job creation and economic growth. Building on this base of localized activity, Oregon’s NGM enterprises can tap into markets across the country and internationally, capitalizing on surging global demand for this technology.
Taking advantage of this opportunity offers real benefits for Oregon’s economy and residents. Annually through 2030, next-generation manufacturing can support an average of over 65,000 jobs. These include direct jobs from manufacturing and software development; indirect jobs from supplying equipment, materials, and services to manufacturers and developers; and induced jobs from spending in the local economy. This industry offers a diverse array of good-paying jobs that cater to different education and experience levels. Policymakers can support these jobs by seizing the opportunity presented by increasing global demand and overcoming barriers to industry growth.
Summary of Recommendations
The analysis presented in this report culminates in recommendations for Oregon’s leaders based on best practices in the United States and abroad. Each recommendation identifies strategies to address barriers to industry growth, or to capitalize on untapped opportunities in the next-generation manufacturing industry. Specifically, Oregon could target challenges in each foundational building block: the innovation ecosystem, access to capital, workforce development, value chain build-out, and local market growth for next-generation manufacturing technology. While the recommendations are intended to be complementary and would be more powerful if adopted as a package, each can also be viewed as a stand-alone option.
Enable Statewide Entrepreneur Resource Coordination
Lack of coordination and visibility of Oregon’s many startup resources makes it difficult for entrepreneurs to access available support. To ensure emerging next-generation manufacturing firms get the help they need, Oregon could co-fund the expansion of the “Venture Catalyst” model statewide. Each Venture Catalyst could facilitate vital connections between local startups and the training, information, and funding opportunities they need to achieve market viability.
Support Product Testing Resources for Technology Commercialization
Before getting into the hands of their first customers, high-risk technologies must undergo extensive testing and validation. However, Oregon’s next-generation manufacturing startups sometimes lack access to adequate testing facilities. By establishing a public access testbed supported by an innovation voucher program, the state could help its next-generation manufacturing startups make it through the “commercialization valley of death.”
Foster the Commercialization Culture at Universities
While commercialization of innovations can benefit universities, Oregon lags behind other states in tech transfer. By recommending policies that nurture marketable applications of basic research, the state’s Higher Education Coordinating Commission could help Oregon’s institutions of higher learning improve industry relations, generate positive publicity, and discover new funding opportunities. Potential measures include recognizing patents as creative scholarship in tenure policies, establishing startup support programs, and supporting entrepreneurial leaves of absence for faculty.
Access to Capital
Increase Access to Long-Term Capital
The long commercialization period faced by some NGM technology startups creates a challenge in accessing traditional sources of capital. Because philanthropic foundations focus on the long-term impact of investments rather than immediate returns, their program- and mission-related investments can dramatically increase probability of success for next-generation manufacturing startups. By designating a specialist to facilitate foundations’ investments in Oregon, the state could help unlock millions of dollars in new capital for Oregon’s emerging businesses.
Create a Capital Gains Tax Exemption
Oregon’s unusually high capital gains tax rate depresses the availability of in-state financing from venture capitalists and angel investors. The state could create a capital gains tax exemption for early-stage investments in companies building next-generation manufacturing technology. Establishing a minimum investment length could help ensure the exemption has a meaningful impact.
Establish Oregon’s Capital Locator Tool
Simply figuring out what funding options are available and worthy of pursuit is one of the most difficult challenges facing entrepreneurs. A simple online capital locator tool, modeled on successful applications in other states, could consolidate the in-state entrepreneurial resources available by type and region, saving entrepreneurs valuable time and helping them access capital they may not have found on their own.
Expand Training Programs and Opportunities for Incumbent Workers
Oregon will need to upgrade its existing workforce to meet growing demand for next-generation manufacturing technology, but the state currently invests little in incumbent worker training. To prevent a skills gap, Oregon could enact a tax credit for businesses that retrain their employees. Successful training incentives in other states offer a model for Oregon to bring its investments in existing workers up to speed.
Create an NGM Industry Council to Coordinate Workforce Training
Oregon’s siloed workforce development and education systems make it difficult for employers to find needed talent, and for workers to ensure they have the skills they need to find good-paying jobs. An industry-led workforce development council could facilitate engagement between employees and training programs. Higher levels of coordination could help the workforce stay current with rapid changes in the next-generation manufacturing industry and help employers build capacity quickly when they are ready to grow.
Increase Work-Based Opportunities for High School Students
To help improve Oregon’s relatively low high school graduation rates, the state could increase state funding for work-based learning opportunities. Work-based learning program participation is highly correlated with academic success and can better prepare Oregon’s youth for jobs in the next-generation manufacturing industry. By utilizing funds from Measure 98, Oregon could fund this expansion without raising new revenue.
Build a Comprehensive Next-Generation Manufacturing Cluster Partnership
Oregon’s diverse community of NGOs relevant to next-generation manufacturing lacks a coordinated action plan for growing the next-generation manufacturing cluster. A public-private partnership could take the lead on enabling collaboration across the value chain in areas such as knowledge sharing, asset growth, policy advocacy, and cluster development. Once a cluster growth plan is in place, the partnership could formalize as a Center of Excellence and coordinate efforts across the next-generation manufacturing industry.
Reinstate and Improve the R&D Tax Credit
While Oregon let its previous R&D tax credit expire, a more narrowly-targeted credit could enable R&D efforts with long-term economic benefit. Key features could be to limit the credit’s availability to companies below a certain size or offer a greater incentive for substantially large increases in R&D spending. With the right structure to prevent misuse, an R&D tax credit could help the next-generation manufacturing cluster grow.
Broadcast Oregon’s Business Assets
Given its small population and its neighbor to the south, Oregon is often overlooked by business leaders around the country and the world. With increased investment in effectively marketing Oregon’s business advantages, the state can bring more next-generation manufacturing firms into its value chain. A redesigned website and well-targeted digital media could get Oregon’s brand in front of the small- and medium-sized business executives, which are the state’s ideal recruitment targets.
Accelerate Foreign Direct Investment Efforts for Next-Generation Manufacturing
Attracting levels of foreign direct investment commensurate with Oregon’s population size could be one of the most effective tools for growing the state’s next-generation manufacturing value chain. Potential strategies include engaging more aggressively with existing organizations designed to help increase foreign direct investment, opening more offices overseas, and establishing a state program to help international firms establish successful operations.
Create a Next-Generation Manufacturing Showcase Program
As peer behavior is one of the critical factors underlying technology adoption, it is difficult for next-generation manufacturing technologies to gain a foothold in industries where networked equipment and precision machinery remain a rarity. State-funded showcase programs in industries with low next-generation manufacturing penetration could validate the technology’s benefits to late adopters and create competitive pressure to adopt new systems and equipment.
Allocate Funding for Embedded Energy Efficiency Experts
Busy manufacturers lack the time and personnel necessary to implement and oversee energy efficiency projects. A state-funded cohort of energy efficiency experts who can be embedded within manufacturing facilities could significantly increase the demand for energy-saving next-generation manufacturing technologies.
Enact an Energy Efficiency Property Tax Incentive
Next-generation manufacturing technologies can produce energy savings up and down the supply chain, yet energy efficiency investments are excluded by the Oregon tax code’s renewable energy provisions. By exempting upgrades that increase onsite and downstream energy efficiency from property taxes, Oregon could make it more feasible for manufacturers to install next-generation manufacturing technology.